ON Semi looks ahead after challenging 2012

SAN FRANCISCO--Analysts gave mixed reviews on the prospects for ON Semiconductor Corp. Thursday (Feb. 7) after the company reported better-than-expected sales and pro forma profit for the fourth quarter of 2012.

"This past year marked one of the most protracted down cycles for the semiconductor industry and the company since ON Semiconductor's inception in 1999," Keith Jackson, ON Semi's president and CEO, said through a statement. "The weak demand environment throughout 2012 proved to be challenging--especially following a year in which both ON Semiconductor and our SANYO Semiconductor Products Group were negatively impacted by two catastrophic natural disasters and the strengthening of the yen."

Ian Ing, an analysts with Lazard Capital Markets, said in a report circulated Thursday that despite some prominent design wins by ON Semi in the communications and automotive space--which represented 41 percent of the company's fourth quarter sales--Lazard analysts believe the company faces subdued prospects in the consumer and computing space and a slow recovery in the industrial segment. "We remain on the sidelines as a broader macro recovery is likely required to drive outperformance," Ing wrote of ON Semi.

Craig Berger, an analyst with FBR Capital Markets said in a separate report that ON Semi's results and guidance were better than expected and that the firm provided upbeat commentary in a call with financial analysts. "This is encouraging as chip investors look for signs of a cyclical recovery, inventory restocking, and any signs of the next upturn," Berger wrote.

Lazard maintains a "neutral" rating on ON Semi's stock, which traded at $8.12 in afternoon trading Thursday following the quarterly report, down 1 percent from Wednesday's closing price. FBR maintains an "outperform" rating, equivalent to "buy," and a $9.25 price target on ON Semi's stock.

Jackson noted that ON Semi took several actions to reduce costs as a result of the challenging conditions, including cutting jobs at Sanyo.

Looking forward, Jackson said ON Semi anticipates growth drivers for its business to include the launch of Ultrabooks based on Intel Corp.'s Hawell microprocessors, adoption of Microsoft's Windows 8 with touchscreen support, increased power density and efficiency requirements throughout portable computing and the continued adoption of high-speed interfaces such as Thunderbolt, USB and HDMI.